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MT4: how to change "EURUSD" to "#EURUSD"? 3 replies

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did oanda just drop its spread for eurusd to 1 pip? 11 replies

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  • #891,521
  • Apr 21, 2014 3:53pm Apr 21, 2014 3:53pm
EurUsd Daily - Butterflies
2014.04.16.
2014.04.21.

Edit:
- both butterflies and previously posted 'small' AB=CD are aiming to ~1.37500
- while the 'big' AB=CD and the purple butterfly are aiming to ~1.36000
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 2014.04.16. EurUsd Daily.png Size: 31 KB
Click to Enlarge Name: 2014.04.21. EurUsd Daily Butterfly.png Size: 35 KB
f(z)=z2+c
  • #891,522
  • Apr 21, 2014 4:01pm Apr 21, 2014 4:01pm
Quoting JeremyWS
{quote} Thomson Reuters Eikon
Thanks
  • #891,523
  • Apr 21, 2014 4:09pm Apr 21, 2014 4:09pm
Quoting JeremyWS
{quote} I don't know whether he used hist/realized vol or implied vol, but the standard way to risk-adjust your trades is to consider a forward looking implied volatility, typical swing trades might use 1 month IV (chart) We can see that its at 5.8, much below the peak of 29 (5.8/29 = 1/5 = 1 pip today = 5 pips in 2008) Compared to 2010/2011 mean of 12.31, todays 5.8 equates to approximately 1/2 (0.47) so a pip today = 2 pips back then. Typically traders will adjust according and have a notional position twice the size today that they would have...
thank you very much for your response!

you are right, but i'm not sure colleague was talking about the same thing.
i got impression he was responding to gatorla's post about GBPUSD being better pair to short than EURUSD at the moment. the reason for it, as i understood, was the idea that one shorting GBPUSD would cash in more pips than shorting EURUSD at the same time. if i got it right, then i think that is something very different from what you're saying because math you're showing is the important tool in risk management and it implies that lower the volatility > lower the risk. but that by no means imply that lower volatility means more pips (assuming correct trade direction).

so, in short, i understood him talking about how many pips one might earn while you're talking about how many pips one may risk.

or did i miss something?
big numbers are our friends...
  • #891,524
  • Apr 21, 2014 4:09pm Apr 21, 2014 4:09pm
Quoting Vachus
{quote} There is nothing wrong, but i hardly highly suspect someone's ability to adapt his position as market moves ... i have not heard of someone lived long, to tell the story!
changed hardly to highly. It is difficult to change positions on small time frame, because you will often end up be whipsawed by the market both ways. So it is better to stick to one way for a while, instead of being chewed by the market both ways. On large time frame however, one should adapt his positions as market moves.
ignore wackos and psychos, including myself. But I can't add myself to iggy
  • #891,525
  • Apr 21, 2014 4:46pm Apr 21, 2014 4:46pm
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Attached Image (click to enlarge)
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  • #891,526
  • Apr 21, 2014 4:49pm Apr 21, 2014 4:49pm
Quoting deeZG
{quote} thank you very much for your response! you are right, but i'm not sure colleague was talking about the same thing. i got impression he was responding to gatorla's post about GBPUSD being better pair to short than EURUSD at the moment. the reason for it, as i understood, was the idea that one shorting GBPUSD would cash in more pips than shorting EURUSD at the same time. if i got it right, then i think that is something very different from what you're saying because math you're showing is the important tool in risk management and it implies...
basically, pips are useless and the quicker you forget what a pip is the better. Think %, always %

If you consider a 1% move, in EURUSD that will be 138 pips, and GBPUSD it will be 168 pips, but the pips aren't the same so what is the point of using an arbitrary and pointless quotation.

In terms of this, GBPUSD implied volatilty is less than EURUSD, so you would expect if the direction was the same, the EURUSD will move a greater % not less...

ceterus paribus, lower implied volatilty = lower risk

BUT, traders will look to this, and go - ok, so there is less risk in the move (in %), so lets have a bigger position to account for this. So a notionally equivalent position in EURUSD and GBPUSD would be wrong, you would have a 1.1x larger GBPUSD position than EURUSD becuase there is less risk in GBPUSD. So to compensate for this lower risk in the market, you have more risk at your end.
  • #891,527
  • Apr 21, 2014 4:52pm Apr 21, 2014 4:52pm
Quoting JeremyWS
{quote} basically, pips are useless and the quicker you forget what a pip is the better. Think %, always % If you consider a 1% move, in EURUSD that will be 138 pips, and GBPUSD it will be 168 pips, but the pips aren't the same so what is the point of using an arbitrary and pointless quotation. In terms of this, GBPUSD implied volatilty is less than EURUSD, so you would expect if the direction was the same, the EURUSD will move a greater % not less... ceterus paribus, lower implied volatilty = lower risk BUT, traders will look to this, and go -...
so the EU will go higher? (j/k)
  • #891,528
  • Apr 21, 2014 4:53pm Apr 21, 2014 4:53pm
Quoting ffleo
{quote} geez you still do not realize your stupidity. You trip on M1, and you keep your position the same direction more than hours, or even days. You keep the same direction more than your time frame you trade on. I said days ago it is a waste of time to talk to you lowly intelligent fella. Leave me alone please.
Short Biased is not holding a trade.

I have posted my outlook on this weeks market and bottom side targets. Just because I trip the M1 charts, doesn't mean I forever hold and doesn't mean that I only play direction of the major.

Again, you have no idea how to trade...especially as applied to the fast charts.

I cannot take another short right now until I see confirmation...that may not happen for the next few hours.

If I was to take a position, (which I am not going to do at current) it would be a long...but I would rather tap out and wait for confirmation on the Skorts.

Throw down a chart, Slappy...

Let's see whatcha got!
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #891,529
  • Apr 21, 2014 4:54pm Apr 21, 2014 4:54pm
Quoting JeremyWS
{quote} basically, pips are useless and the quicker you forget what a pip is the better. Think %, always % .
... Man I wish more folks thought like this Jeremy.
Ghost Rider - WWTBMD?
  • #891,530
  • Apr 21, 2014 4:55pm Apr 21, 2014 4:55pm
Quoting ffleo
{quote} changed hardly to highly. It is difficult to change positions on small time frame, because you will often end up be whipsawed by the market both ways. So it is better to stick to one way for a while, instead of being chewed by the market both ways. On large time frame however, one should adapt his positions as market moves.
Thanks for the correction, highly appreciated
"It's the Margin, Stupid."
  • #891,531
  • Apr 21, 2014 4:57pm Apr 21, 2014 4:57pm
Quoting albchr
{quote} ... Man I wish more folks thought like this Jeremy.
Hey Chris...

What is a pip in relation to a currency as a percentage?

Geeeeeeeeeeeeeeeeeeeeez!

Don't think of it as the color green...never think green, just think about a blending of Blue and Yellow...

Welcome to the department of redundancy department.
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #891,532
  • Apr 21, 2014 4:59pm Apr 21, 2014 4:59pm
Quoting JeremyWS
In terms of this, GBPUSD implied volatilty is less than EURUSD, so you would expect if the direction was the same, the EURUSD will move a greater % not less...
Are you sure about this one?
The only thing that volatility measure tells us is how much risk we must take when taking a position. It does not automatically transfer into how much underlying pair/stock/whatever will move.

GBPUSD might have higher IV than EURUSD and still move less % than EURUSD, couldn't it? And in that case it would be bad choice because one would taking higher risk for potentially lower return.

That was my whole point - volatility directly corresponds to risk but does not directly correspond to actual % of move in desired direction.

PS.
I agree completely about % vs pips
big numbers are our friends...
  • #891,533
  • Apr 21, 2014 5:04pm Apr 21, 2014 5:04pm
Quoting deeZG
{quote} Are you sure about this one? The only thing that volatility measure tells us is how much risk we must take when taking a position. It does not automatically transfer into how much underlying pair/stock/whatever will move. GBPUSD might have higher IV than EURUSD and still move less % than EURUSD, couldn't it? And in that case it would be bad choice because one would taking higher risk for potentially lower return. That was my whole point - volatility directly corresponds to risk but does not directly correspond to actual % of move in desired...
Implied/expected volatility is lower in GBPUSD than EURUSD, therefore you would expect a lower % move in either direction (depending to some extent on the volatility smile (colourful one) (both attached)

But implied/realized is not always correct, it is what the market expects, the actual/realized/historical (whatever you want to call it) can vary hugely.

For example the expected 5.2 vol over the next 1 month could be entirely wrong and we could have 8, where as the 1 month expected in EURUSD is 6 but we only get 4...

Thing with risk management is, is that it uses a forward looking aspect, because in essence the level of volatilty determines how expensive/cheap a position is to hedge, and therefore plays into risk. Lower Vol = lower risk = cheaper to hedge etc
Attached Image (click to enlarge)
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Attached Image
  • #891,534
  • Apr 21, 2014 5:06pm Apr 21, 2014 5:06pm
Hopefully we get confirmation of the break out of the 1.3789 level and then a retracement to it for a possible short entry.
  • #891,535
  • Apr 21, 2014 5:07pm Apr 21, 2014 5:07pm
Should add, actual vol tends to be lower than implied vol as the market normally overpays to hedge.

imagine you are a trader and you haven't hedged a position and there is a huge move, your risk manager is going to be very mad. so most tend to overpay hedging costs to avoid this.

Blue - historical/realized etc

red - implied/expected
Attached Image (click to enlarge)
Click to Enlarge Name: GBP vols.png Size: 157 KB
  • #891,536
  • Apr 21, 2014 5:10pm Apr 21, 2014 5:10pm
Quoting JeremyWS
{quote} Implied/expected volatility is lower in GBPUSD than EURUSD, therefore you would expect a lower % move in either direction (depending to some extent on the volatility smile (colourful one) (both attached)
lower move in either direction yes, definitely...but that is very different from lower move in one (same) direction, isn't it?
higher volatility might even cause lower % move in one direction compared to other pair (with lower volatility) moving in that same direction.

therefore, it can tell us much about risk we're taking but can't be definite tool for expected results.
big numbers are our friends...
  • #891,537
  • Apr 21, 2014 5:14pm Apr 21, 2014 5:14pm
Quoting deeZG
{quote} lower move in either direction yes, definitely...but that is very different from lower move in one (same) direction, isn't it? higher volatility might even cause lower % move in one direction compared to other pair (with lower volatility) moving in that same direction. therefore, it can tell us much about risk we're taking but can't be definite tool for expected results.
well as said, the volatilty smile determines the relative vol to the upside and downside.

Volatility for 1.60 strikes in GBPUSD will be far more expensive than 1.8 strikes, because the market knows the positioning is very long, and so a fall lower will be a >% than a move higher.

Either way, using implied volatility is how people risk manage, its the industry standard. There is no point looking backwards at historical vol, because there could have been loads of data in the last week, and none in the next week and that skews the risk parameters.

But at the end of the day, you have to be right in the direction of the trade, otherwise you are going to lose.

EDIT - here is the AUDUSD 3 month vol smile, note how as you move away from ATM (spot price) the volatility (cost of hedging) increases as you move to the downside strikes, and decreases as you look to topside ones. therefore there is greater % expected to the downside.

Not only will this impact risk, but it impacts the options market and you can see this by looking at the DTCC position ( far more downsides, i.e. people are paying more for downside exposure)
Attached Image (click to enlarge)
Click to Enlarge Name: AUDUSD strike reports.png Size: 590 KB
Attached Image
  • #891,538
  • Apr 21, 2014 5:46pm Apr 21, 2014 5:46pm
Quoting JeremyWS
{quote} well as said, the volatilty smile determines the relative vol to the upside and downside. Volatility for 1.60 strikes in GBPUSD will be far more expensive than 1.8 strikes, because the market knows the positioning is very long, and so a fall lower will be a >% than a move higher. Either way, using implied volatility is how people risk manage, its the industry standard. There is no point looking backwards at historical vol, because there could have been loads of data in the last week, and none in the next week and that skews the risk parameters....
i agree with all what you say about risk.
there is just one detail i'm not sure if i understand so let me ask you directly.. lets say that:

1) Pair1 moves south
2) Pair2 moves south
3) Pair1 has higher volatility than Pair2

are you saying that because of 3) Pair1 will move more % south than Pair1?
big numbers are our friends...
  • #891,539
  • Apr 21, 2014 5:48pm Apr 21, 2014 5:48pm
Quoting deeZG
{quote} i agree with all what you say about risk. there is just one detail i'm not sure if i understand so let me ask you directly.. lets say that: 1) Pair1 moves south 2) Pair2 moves south 3) Pair1 has higher volatility than Pair2 are you saying that because of 3) Pair1 will move more % south than Pair1?
yes.
  • #891,540
  • Apr 21, 2014 5:54pm Apr 21, 2014 5:54pm
Quoting Magix
{quote} Does it matter how they viewed it, as pips or percent? It's all bullshit. Ask these wankers if they'd be long or short coming into London...if they can't come up with an actual Answer to this question, does anything they say have any market relevance? Wasn't coming after ya...lol...shit, you should know me better than that! lol
you know cash is a position, right?

A good tip for you, you shouldn't force a trade. not every session will there be a set-up worth taking. You don't need to have a position every minute of everyday

I know people that have gone >1 week without a position, best part is they are salaried so they get paid, literally for nothing... But they aren't in cash for no reason, they know what they are doing.

I fear that if you force a trade every day you might wipe out that micro demo account you use, and that'd be a shame.
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